Sam Teague, Ltd. v. Hawai’i Civil Rights Com’n, 89 Hawai’i 269 (1999)

971 P.2d 1104, 74 Empl. Prac. Dec. P 45,721, 75 Empl. Prac. Dec. P 45,721

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 1

KeyCite Yellow Flag - Negative Treatment

Distinguished by Lales v. Wholesale Motors Co., Hawai’i, February 13,

2014

89 Hawai’i 269 Supreme Court of Hawai‘i.

SAM TEAGUE, LTD., dba Page Hawaii and Sam Teague, Appellants–Appellants,

v. HAWAI‘I CIVIL RIGHTS COMMISSION, Amefil Agbayani, Jack Law, Richart Port, and Daphne

Barbee–Wooten, all in their official capacities as Commissioners of the Hawaii Civil Rights

Commission, Yvette Shaw, and Linda C. Tseu in her official capacity as Executive Director of the

Hawaii Civil Rights Commission, Appellees–Appellees

No. 19691. |

Feb. 3, 1999.

Synopsis

Employer appealed from final decision of the Civil Rights

Commission which ruled in favor of employee on her

pregnancy discrimination claim and awarded employee

back pay, compensatory damages and emotional distress

damages. The First Circuit Court affirmed. Employer

appealed. The Supreme Court, Ramil, J., held that: (1)

Commission properly allowed employee to amend her

complaint to add employer’s president and sole

stockholder; (2) employer’s “no leave” policy violated

pregnancy discrimination rule; (3) bona fide occupational

qualification (BFOQ) defense was not available to

employer despite its small size; and (4) Circuit Court

lacked discretion to deduct unemployment benefits from

back pay award.

Affirmed.

Attorneys and Law Firms

**1107 *272 Dennis W. King (William J. Deeley with

him on the brief) on the briefs, Honolulu, for

Appellants–Appellants Sam Teague, Ltd., dba Page

Hawaii, and Sam Teague.

John Ishihara, on the briefs, Honolulu, for

Appellees-Appellees Hawai‘i Civil Rights Commission,

Amefil Agbayani, Jack Law, Richard Port, Daphne

Barbee–Wooten, and Linda C. Tseu.

MOON, C.J., KLEIN, LEVINSON, NAKAYAMA, and

RAMIL, JJ.

Opinion

Opinion of the Court by RAMIL, J.

In this employment discrimination case,

appellants-appellants Sam Teague, Ltd., d.b.a. Page

Hawaii, and Sam Teague (collectively, “Employer”)

appeal from the circuit court’s final judgment and order

affirming the final decision of appellee-appellee Hawai‘i

Civil Rights Commission (the Commission), filed

February 7, 1996. The Commission concluded in its final

decision that Employer discriminated against

appellee-appellee Yvette Shaw because of her sex

(pregnancy and childbirth) in violation of Hawai‘i

Revised Statutes (HRS) § 378–2(1)(A) (1993) and

Hawai‘i Administrative Rules (HAR) §§ 12–46–106,

12–46–107 and 12–46–108 (1993). The Commission

awarded Shaw $16,500 in back pay, $20,000 in

compensatory damages, and $5,000 in emotional distress

damages.

On appeal, Employer contends that the circuit court erred

by affirming the Commission’s final decision because: (1)

Shaw’s amended complaint was untimely filed violating

the statute of limitations in HRS § 368–11 (1993); (2)

Employer’s policy prohibiting any type of extended leave

for one year did not have a disparate impact on women;

(3) the termination of Shaw’s employment was a bona

fide occupational qualification (BFOQ) reasonably

necessary to the normal operation of the business; and (4)

the back pay awarded to Shaw should have been offset by

the unemployment insurance benefits she received. For

the reasons set forth below, we disagree with all of

Employer’s contentions and affirm the circuit court’s

order and judgment.

I. BACKGROUND

Employer is a two-person business run by its president

and sole stockholder, Sam Teague, and an office manager.

The business sells and rents pagers and provides paging

services. The essential job functions of the office manager

include: (1) general office duties, such as opening and

closing the office, billing, filing, opening and closing

customer accounts, receiving cash amounts under $1,000,

Sam Teague, Ltd. v. Hawai’i Civil Rights Com’n, 89 Hawai’i 269 (1999)

971 P.2d 1104, 74 Empl. Prac. Dec. P 45,721, 75 Empl. Prac. Dec. P 45,721

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 2

giving change, preparing deposits, and collecting overdue

accounts; (2) demonstrating and selling the various

pagers, equipment, and services provided by the

company; (3) programming and testing the pagers; (4)

responding to customer complaints about pagers or

billing; and (5) general inventory, maintenance, and

cosmetic repair of pagers. Typically, a new office

manager would require about six to nine months to learn

and become competent in these functions.

Employer trained each of the office managers to perform

the above-mentioned job functions. During the first six to

eight weeks of training, Employer would not leave the

office manager unsupervised. After the initial training

period, Employer would leave the office manager

unsupervised for approximately 1–3 hours per day.

From 1988 to the time of this appeal, Employer has

instituted a “no leave” policy for its employees. Under

this policy, no “extended” leave would be granted in an

employee’s first year of employment for any reason.

Since December 1990, Employer has also had a policy of

requiring a “one year commitment” from all office

manager applicants. **1108 *273 Under Employer’s

interpretation of this commitment, a new office manager

needed to work for twelve consecutive months without

any extended leave.

On January 29, 1992, Jackie Gonzalez Rivera, a former

office manager, interviewed Shaw for the office manager

position. At this interview, Rivera informed Shaw of the

Employer’s requirement of a one-year commitment and

asked Shaw whether she could make such a commitment.

Rivera did not inform Shaw about the company’s “no

leave” policy and did not explain that the one-year

commitment meant working twelve consecutive months

without taking any extended leave.

At the time of the interview, Shaw thought that the

one-year commitment simply meant being employed with

Employer for twelve months. Shaw assumed that leaves

of absences for disability, pregnancy, or other emergency

purposes were allowed. Based on this understanding,

Shaw told Rivera that her husband was stationed in

Hawai‘i until 1995 and that she would have no problem

working for Employer for at least one year. Shaw

intended to work for Employer until her husband was

transferred out of Hawai‘i.

Thereafter, Employer interviewed and asked Shaw

whether she could make a one-year continuous

commitment to the job. Like Rivera, Employer failed to

inform Shaw of the company’s “no extended leave”

policy and failed to explain that a one-year commitment

would be interpreted as working twelve consecutive

months with no extended leave. At this interview, Shaw

reaffirmed that a one-year commitment would not be a

problem.

On January 30, 1992, Shaw underwent a pregnancy test at

Tripler Army Medical Hospital. The test results reflected

that Shaw was pregnant. On the following day, Employer

offered Shaw the office manager position, and Shaw

accepted the offer.

Shaw’s three-month job performance review was

scheduled for May 11, 1992 and then rescheduled to May

12, 1992. Because Shaw was afraid that her pregnancy

would be a factor in her review, Shaw decided to inform

Teague about her pregnancy after her review.

After receiving a satisfactory review, Shaw informed

Employer that she was pregnant and was expecting to

deliver in September. Shaw requested a six-week

maternity leave. Shocked and angry, Employer expressed

to Shaw that her request constituted a breach of her

agreement to work for one continuous year. Shaw replied

that she was not breaking her one-year commitment and

that she planned to return to work for Employer after

taking maternity leave. Shaw suggested the following

options to Employer: (1) a temporary worker could be

hired; (2) Shaw could shorten her leave to four weeks; or

(3) Shaw could work part-time during the six-week

period. In response, Employer stated that a temporary

worker would be unacceptable1 and rejected Shaw’s other

suggestions. Thereafter, Employer decided to end the

discussion and told Shaw to “go home and sleep on it.”

The following day, Shaw again spoke to Employer about

her request for maternity leave and explained that she and

her husband were not planning to start a family but that

“it happened.” Employer again stated that it would not

work out and that Shaw and her husband “should have

used precautions.”

Based on these discussions, Employer felt that he had

made it clear that he was not going to grant Shaw’s

request for maternity leave. Shaw, however, felt the issue

of her maternity leave was not resolved. Because

Employer thought that Shaw was agitated and upset

during the May 12 and May 13 discussions, Employer did

not want to upset her again and thereafter spoke to her

only about business matters.

**1109 *274 Shaw’s maternity leave was not discussed

again until sometime in August 1992 when Employer and

Shaw determined the date of Shaw’s last day of work

before giving birth. Shaw and Employer agreed that

September 18, 1992 would be Shaw’s last day. By that

Sam Teague, Ltd. v. Hawai’i Civil Rights Com’n, 89 Hawai’i 269 (1999)

971 P.2d 1104, 74 Empl. Prac. Dec. P 45,721, 75 Empl. Prac. Dec. P 45,721

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 3

time, Shaw had mastered seventy-five to eighty percent of

the office manager duties. Shaw gave birth on September

14, 1992. Although Shaw did not ask her doctor about the

length of her maternity leave, Shaw’s doctor would have

recommended a six-week maternity leave period.

On September 16, 1992, Shaw phoned Employer with

information that she had a daughter. Employer

congratulated Shaw and told her that he was lucky to find

a replacement for her. From this conversation, Shaw

thought Employer had found a temporary replacement.

On September 18, 1992, Employer wrote to Shaw stating,

“It will not be possible to hold open your job. The

learning curve for the job is simply too great.” In addition,

Employer enclosed Shaw’s final paycheck and a letter of

reference. It is undisputed that Employer did not

terminate Shaw because of poor work performance or

tardiness.

Surprised and upset by Employer’s September 18, 1992

letter, Shaw called Employer and asked how she could be

terminated even though it was known that she wanted to

return to her job. Employer stated that it had already hired

a permanent replacement and could not hold the position

open. Employer further stated that, as a small business

owner, it could refuse to hold her position open.

Sometime in late August or early September 1992,

Employer interviewed Susan Funari and offered her the

office manager position. Funari began working with

Employer on September 15, 1992. Sometime in the

beginning of October 1992, Funari informed Employer

that she was frustrated with the position and wanted to

resign. Funari’s last day of work was on October 23,

1992.

Thereafter, Employer began its search for a new office

manager. Employer did not contact Shaw to let her know

the office manager position was available. Employer

eventually hired Marnie Wolfert to replace Funari.

Wolfert reported for her first day of work on October 26,

1992.

Six weeks after giving birth, on October 23, 1992, Shaw

was cleared to return to work. Later that day, Shaw wrote

to Employer, asking to be reinstated to the office manager

position on November 2, 1992. Employer responded by

stating that there had been a “misunderstanding” and

reiterated that it would not be possible to hold her position

open or hire temporary help.

Shaw remained unemployed from October 23, 1992 to

September 1993. During this period, Shaw applied for

various administrative, sales, advertising, and clerical

jobs. On the advice of his lawyer, Employer offered Shaw

the office manager position after Wolfert vacated her

position with Employer on November 23, 1993. Shaw

declined the offer because she was again pregnant and

believed that Employer would again deny her maternity

leave. Employer operated the business by himself for a

period of four weeks.

Shaw filed her claim against Employer on December 17,

1992, and later amended her claim on September 9, 1993.

On July 13, 1994, Employer filed a motion to dismiss the

amended claim contending that it was untimely filed. The

Commission denied this motion.

After a contested case hearing before a hearings

examiner, the hearings examiner found that Employer

engaged in discriminatory practices by refusing to grant

Shaw maternity leave and failing to reinstate Shaw. The

hearings officer further awarded Shaw $3,800 in back pay

and $20,000 for emotional injuries. Both parties appealed

this decision.

On March 3, 1995, the Commission affirmed the hearings

officer’s findings and conclusions. However, the

Commission increased the back pay award to $16,500,

because it found that Shaw had attempted to mitigate her

damages by applying to another company in the pager

business and other telecommunications companies. From

the Commission’s decision, Employer appealed to the

circuit court.

The circuit court affirmed the Commission’s final

decision. The circuit court further **1110 *275 found that

Teague had a bias against pregnancy, females (who either

were or might become pregnant), or against women

raising young children. In support of this finding, the

court cited the following statements made by Employer:

a) Pregnancy was a “self-induced illness,”

b) Ms. Shaw should have used “precautions” so she

wouldn’t become pregnant,

c) He felt that the business had been inconvenienced by

employees with young children,

d) He had problems with a previous office manager

who needed time off to care for a young child,

e) His reason for not wanting to reinstate Ms. Shaw

was because of the potential problems she would face

raising a young child,

f) He would not have hired Ms. Shaw if he had known

Sam Teague, Ltd. v. Hawai’i Civil Rights Com’n, 89 Hawai’i 269 (1999)

971 P.2d 1104, 74 Empl. Prac. Dec. P 45,721, 75 Empl. Prac. Dec. P 45,721

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 4

that she was pregnant, and

g) He wouldn’t hire a woman with a young child[.]

From the circuit court’s decision, Employer timely

appealed to this court.

II. STANDARD OF REVIEW

[1] [2] [3] [4] [5] [6] Review of a decision made by the

circuit court upon its review of an agency’s decision is

a secondary appeal. The standard of review is one in

which this court must determine whether the circuit

court was right or wrong in its decision, applying the

standards set forth in HRS § 91–14(g) to the agency’s

decision. This court’s review is further qualified by the

principle that the agency’s decision carries a

presumption of validity and appellant has the heavy

burden of making a convincing showing that the

decision is invalid because it is unjust and unreasonable

in its consequences.

HRS § 91–14(g) provides:

Upon review of the record the court may affirm

the decision of the agency or remand the case with

instructions for further proceedings; or it may

reverse or modify the decision and order if the

substantial rights of the petitioners may have been

prejudiced because the administrative findings,

conclusions, decisions, or orders are:

(1) In violation of constitutional or statutory

provisions; or

(2) In excess of the statutory authority or

jurisdiction of the agency; or

(3) Made upon unlawful procedure; or

(4) Affected by other error of law; or

(5) Clearly erroneous in view of the reliable,

probative, and substantial evidence on the

whole record; or

(6) Arbitrary, or capricious, or characterized by

abuse of discretion or clearly unwarranted

exercise of discretion.

Under HRS § 91–14(g), conclusions of law are

reviewable under subsections (1), (2), and (4);

questions regarding procedural defects are

reviewable under subsection (3); findings of fact are

reviewable under subsection (5); and an agency’s

exercise of discretion is reviewable under subsection

(6).

Konno v. County of Hawai‘i, 85 Hawai‘i 61, 77, 937

P.2d 397, 413 (1997) (citations and internal quotation

marks omitted).

III. DISCUSSION

A. Timeliness of Amended Complaint

[7] Employer first argues that the amended complaint filed

September 9, 1993, which added Teague as a party in his

personal capacity, was untimely filed. Employer

maintains that, under HRS § 368–11(c), the statute of

limitations expired four months prior to the filing of the

amended complaint. We disagree.

HRS § 368–11 (1993) sets forth the applicable statute of

limitations period and provides in relevant part:

(a).... Any individual claiming to be aggrieved by an

alleged unlawful discriminatory practice may file with

the commission’s executive director a complaint in

writing that shall state the name and address of the

person or party alleged to have committed the unlawful

discriminatory practice complained of, set forth the

particulars thereof, and contain other information as

may be required by the commission. The attorney

general, or the **1111 *276 commission upon its own

initiative may, in like manner, make and file a

complaint.

....

(c) No complaint shall be filed after the expiration of

one hundred eighty days after the date:

(1) Upon which the alleged unlawful discriminatory

practice occurred; or

(2) Of the last occurrence in a pattern of ongoing

discriminatory practice.

Based upon the plain language of HRS § 368–11, Shaw

needed to file her complaint alleging unlawful

discrimination within 180 days after either the occurrence

of the alleged discriminatory practice or the last

occurrence in a pattern of ongoing discriminatory

Sam Teague, Ltd. v. Hawai’i Civil Rights Com’n, 89 Hawai’i 269 (1999)

971 P.2d 1104, 74 Empl. Prac. Dec. P 45,721, 75 Empl. Prac. Dec. P 45,721

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 5

practice.

[8] HAR § 12–46–6.1 (1992) specifically allows the

amendment of a complaint to add new parties.2 HAR §

12–46–6.1 provides in relevant part:

(a) Prior to the commencement of proceedings before

the hearings examiner, the executive director may

permit the parties, including the Attorney General and

executive director, to amend documents filed with the

Commission, including a complaint or responsive

statement. After commencement of proceedings,

amendments may be granted by the hearings examiner.

(b) An amendment may be made:

(1) To cure technical defects or omissions; or

(2) To clarify or amplify allegations, to add new

causes of action or defenses, or add new parties.

(c) Amendments shall relate back to the original

filing date of the document.

(Emphases added.) The Commission adopted HAR §

12–46–6.1 as an administrative rule pursuant to HRS §

368–3(9) (1993), which authorizes the Commission to

adopt rules.3 Based on the language of HAR §

12–46–6.1, Shaw, the attorney general, or the executive

director of the Commission could have amended the

complaint in this case to add a new party. This

amendment would have related back to the original

filing date of the complaint. [9] In this case, Shaw filed the original complaint against

Employer on December 17, 1992, after her offer to return

to work was rejected. Employer rejected Shaw’s offer to

return to work on October 26, 1992, at which time

Employer informed Shaw that a permanent replacement

for her had been hired. Because this complaint was filed

within 180 days of Employer’s refusal to reinstate Shaw

to her original position, the original complaint was timely

filed.4

Employer argues that the hearing officer’s decision to

allow the amendment of the complaint was arbitrary.

Although HAR § 12–46–6.1 does not specifically require

a reason in order to amend a complaint, the Commission

added Teague to the complaint as an individual when it

was discovered that Teague was the individual

responsible for the alleged discriminatory conduct. The

Commission noted that there may have been some

confusion in this case because the business was called

“Sam Teague, Inc., d.b.a. Page Hawaii.” Because HRS §

378–1 (1993) defines “employer” to include agents of

persons having one or more employees,5 the Commission

added Teague when it discovered **1112 *277 that

Teague was an agent of Employer and the individual

committing the alleged discriminatory conduct.

Therefore, we hold, under HRS § 368–11(c) and HAR §

12–46–6.1, that the amendment of the complaint in this

case did not violate the statute of limitations.

B. Sex Discrimination

1. The “No Extended Leave” Policy

Employer contends that Shaw was terminated because she

lied when she applied for the position and that the policy

prohibiting any type of extended leave for one year did

not have a disparate impact on women.

Article I, section 5 of the Hawai‘i Constitution (1978),

provides:

No person shall be deprived of life, liberty or property

without due process of law, nor be denied the equal

protection of the laws, nor be denied the enjoyment of

the person’s civil rights or be discriminated against in

the exercise thereof because of race, religion, sex or

ancestry.

(Emphases added.) Hawai‘i’s Employment

Discrimination Law (the statute) was enacted to enforce

the constitutional prohibition against sex discrimination in

the exercise of a person’s civil rights in the employment

arena.

As part of the statute, HRS § 378–2(1)(A) provides in

relevant part:

It shall be an unlawful discriminatory practice:

(1) Because of race, sex, sexual orientation, age,

religion, color, ancestry, disability, marital status, or

arrest and court record:

(A) For any employer to refuse to hire or employ or to

bar or discharge from employment, or otherwise to

discriminate against any individual in compensation or

in the terms, conditions, or privileges of employment[.]

(Emphasis added.) As used in this statute, “[b]ecause of

sex” is defined to include “because of pregnancy,

childbirth, or related medical conditions.” HRS § 378–1

(1993). This definition was added in 1981 to “clarif[y]

Sam Teague, Ltd. v. Hawai’i Civil Rights Com’n, 89 Hawai’i 269 (1999)

971 P.2d 1104, 74 Empl. Prac. Dec. P 45,721, 75 Empl. Prac. Dec. P 45,721

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 6

and strengthen ... the existing statutory prohibition against

employment discrimination because of sex.” Sen. Stand.

Comm. Rep. No. 1109, in 1981 Senate Journal, at 1363.

Indeed,

[p]regnancy and childbirth are, of

course, phenomena shared only by

women, and only female

employees are susceptible to

employment losses which may be

tied to either. So, if an employer

grants employees leave for any and

all temporary physical disabilities

except pregnancy, and restoration

to the employee’s former job upon

the expiration of leave, it is

apparent that women employees are

subject to a substantial burden that

men need not suffer.

Abraham v. Graphic Arts Int’l Union, 660 F.2d 811

(D.C.Cir.1981) (footnotes and internal quotation marks

omitted).

[10] To enforce the legislative mandate that employment

practices should not penalize pregnant women who work,

the Commission has adopted specific rules on pregnancy

discrimination. HAR § 12–46–107 (1992) provides in

relevant part:

(a) An employer shall not exclude from employment a

pregnant female applicant because of her pregnancy.

(b) It is an unlawful discriminatory practice to

discharge a female from employment or to penalize her

in terms, conditions, and privileges of employment

because she requires time away from work for

disability due to and resulting from pregnancy,

childbirth, or related medical conditions.6

(Footnote added.) In addition, HAR § 12–46–108 (1992)

provides in relevant part:

(a) Disability due to and resulting from pregnancy,

childbirth, or related medical conditions shall be

considered by the employer to be justification for a

leave, with or without pay, by the female employee for

a reasonable period of time. “Reasonable **1113 *278

period of time” as used in this section shall be

determined by the employee’s physician, with regard

for the employee’s physical condition and the job

requirements.

....

(c) A female employee shall be reinstated to her

original job or to a position of comparable status and

pay, without loss of accumulated service credits and

privileges. The employer may request, prior to the

employee’s return, a medical certificate from the

employee’s physician attesting to her physical

condition and approving her return to work.

In short, the rules prohibit employers from: (a) denying

females employment because of pregnancy; (b) penalizing

female employees because of pregnancy; and (c)

discharging female employees because of pregnancy. The

rules further provide for: (a) reasonable leave time

required due to pregnancy or childbirth; and (b)

reinstatement of a female employee upon her return from

leave due to pregnancy or childbirth.7 It is well recognized

that the purpose of these rules is to protect equal job

opportunities for women as compared to others by

removing a female disability job risk not faced by men

and non-pregnant females. See, e.g., Miller–Wohl Co. v.

Commissioner of Labor & Indus., 214 Mont. 238, 692

P.2d 1243, 1251 (Mont.1984).

[11] Other jurisdictions that have enacted regulations

similar to HAR §§ 12–46–107 and 12–46–108 have held

that “no leave” policies similar to Employer’s in this case

result in impermissible sex discrimination. For example,

in Miller–Wohl, the Montana Supreme Court held that a

clothing store’s no-leave policy created a disparate effect

on women who become pregnant, as compared to those

employees who do not become pregnant. 692 P.2d at

1252. In so holding, the court applied a Montana statute

with language similar to HAR §§ 12–46–107 and

12–46–108.8 The court found that the employer in

Miller–Wohl, which was a retail chain of about 290

ladies’ wear stores, denied the plaintiff maternity leave

because of its practice of denying leave for any disabled

employee whose tenure with employer was less than one

year. Id. at 1250. The court reasoned that, although the

employer’s policy was facially neutral, its no-leave policy

subjected pregnant women to a job termination risk not

faced by men. Id.

In this case, despite the clear language of HAR §

12–46–108(a) mandating reasonable leave time due to

pregnancy or childbirth, Employer denied Shaw any time

off for the birth of her child. Although Employer had a

“no leave” policy in effect, Employer failed to inform

Shaw of this specific policy. According to Shaw,

Employer merely asked her for a “one-year commitment.”

Shaw did not understand this one-year commitment to

mean twelve consecutive months of service with no

extended leave of any sort.

[12] [13] [14] Notwithstanding the understanding of the

parties, however, an employer’s policy prohibiting any

Sam Teague, Ltd. v. Hawai’i Civil Rights Com’n, 89 Hawai’i 269 (1999)

971 P.2d 1104, 74 Empl. Prac. Dec. P 45,721, 75 Empl. Prac. Dec. P 45,721

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 7

extended leave for one **1114 *279 year contravenes the

plain language of HAR § 12–46–108(a). Although

Employer did not specifically define what would

constitute an extended leave, the evidence adduced

demonstrates that Employer would not, for any reason,

grant leave time that would extend beyond a few days.

While such a short leave may accommodate minor

disabilities, it falls considerably short of the period

generally recognized in the human experience as the time

needed for pregnancy leave.9 In any event, HAR §

12–46–108(a) clearly and unambiguously requires that an

employer grant leave to an employee for “a reasonable

period of time” as determined by the employee’s

physician. Therefore, we hold that Employer’s policy

denying any extended leave during Shaw’s first year of

employment violated the plain and unambiguous language

of HAR § 12–46–108.10

[15] Nevertheless, Employer argues that Shaw was

terminated because she intentionally failed to disclose her

pregnancy before accepting the position. Contrary to

Employer’s contention, the record indicates that

Employer did not directly ask Shaw if she was pregnant.

In fact, an employer cannot lawfully ask a job applicant,

directly or indirectly, if she is pregnant.11 Given the law

prohibiting employers from asking whether an applicant

is pregnant, it follows that an applicant should not be

obligated to disclose her pregnancy.

[16] Although Employer asserts that Shaw made a one-year

commitment knowing that she could not fulfill her

commitment, Employer never told Shaw about its “no

leave” policy. Shaw could have reasonably believed that a

one-year commitment simply meant that she would

remain employed with the business for at least a term of

one year. Shaw could also have legitimately believed that

she would be allowed to take some leave, because she

was told that Teague “was a flexible man” and, in

accordance with her understanding of the law, that an

employee is entitled to maternity leave. Consistent with

her understanding of the one-year commitment, the record

reflects that Shaw intended to return to work after giving

birth. Therefore, Employer has failed to establish a

legitimate nondiscriminatory explanation of the adverse

employment action.

**1115 *280 2. Bona Fide Occupational Qualification

(BFOQ) Defense

[17] Employer next argues that, “even if [Employer] ... had

the intention to discriminate against Shaw, its business

necessities justified its actions because there were no

reasonable accommodations or feasible alternatives to

hiring a replacement.” (Emphasis omitted.) We disagree.

HRS § 378–3(2) (1993) provides in relevant part:

Exceptions. Nothing in this part shall be deemed to ...

[p]rohibit or prevent the establishment and maintenance

of bona fide occupational qualifications [BFOQ]

reasonably necessary to the normal operation of a

particular business or enterprise, and that have a

substantial relationship to the functions and

responsibilities of prospective or continued

employment.

(Emphasis in original.) Thus, the language of HRS §

378–3(2) indicates that the BFOQ defense is limited to

instances where sex discrimination is: (1) “reasonably

necessary” to the “normal operation” of the “particular”

business; and (2) “substantially related” to the functions

of the position in question.

[18] [19] [20] Based upon the plain language of HRS §

378–3(2) and the legislative history underlying our

employment discrimination law discussed above, the

statute prohibits the use of general subjective employment

standards and mandates BFOQs that are objective and

verifiable. Together with the term “occupational,” the

“substantially related” clause indicates that these

objective and verifiable BFOQs must concern job-related

skills and aptitudes. By modifying “qualification” with

“occupational,” the legislature narrowed the BFOQ

defense to qualifications that affect an employee’s ability

to do the job.12

Despite the language of the BFOQ defense, Employer

argues, in essence, that its small size (two employees)

justifies its “no-leave” policy. This contention is

inconsistent with our interpretation of the BFOQ defense.

Employer’s decision to discharge Shaw and subsequent

refusal to reinstate her was unrelated to her ability to

fulfill the duties of office manager. In fact, at the time

Shaw sought reinstatement on October 23, 1992, the

record indicates that Shaw, who had mastered

seventy-five to eighty percent of the duties of office

manager, was more qualified and experienced than either

of her subsequent replacements, who had no experience.

Because the action taken against Shaw was unrelated to

her ability to perform the job, the BFOQ defense is

inapposite and does not protect Employer.

Employer also argues that HRS § 378–2(1)(A) should not

be applied to two-person employers because it “relegates

them (1) to the impossible feat of finding and training an

inexperienced temporary worker or (2) the unreasonable

obligation of one person performing two jobs for seven

Sam Teague, Ltd. v. Hawai’i Civil Rights Com’n, 89 Hawai’i 269 (1999)

971 P.2d 1104, 74 Empl. Prac. Dec. P 45,721, 75 Empl. Prac. Dec. P 45,721

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 8

weeks.” We disagree.

**1116 *281 In enacting the employment discrimination

law, the legislature intended that all employers, regardless

of size, be subjected to its provisions. HRS § 378–1

(1993) provides in relevant part:

“Employer” means any person, including the State or

any of its political subdivisions and any agent of such

person, having one or more employee, but shall not

include the United States.

(Emphases added.) Based upon this language, Employer’s

contention is without merit.

In addition, we note that Employer would not have

worsened its position had it reinstated Shaw as required

by HAR § 12–46–108. Although Employer cites the “high

learning curve” of the position as a justification for its

actions against Shaw, both Funari and Wolfert were

inexperienced in the area. In contrast, Shaw had mastered

seventy-five to eighty percent of the office manager’s

duties and could have feasibly resumed her duties at the

time she sought reinstatement on October 23, 1992.

Therefore, we hold that the circuit court correctly upheld

the Commission’s conclusion that the actions against

Shaw were not justified by a BFOQ.

3. Damages and the Collateral Source Rule

[21] Employer argues that the circuit court erred by failing

to reduce the award of back pay by the amount of

unemployment benefits received by Shaw. We disagree.

In this case, the circuit court affirmed the Commission’s

back pay award of $16,900. This amount represented the

amount that Shaw would have earned for the period from

October 23, 1992, the date on which she was cleared to

return to work, through November 23, 1993, the date on

which she was offered and rejected the office manager

position by Employer.13 During this time period, Shaw

received $8,322 in unemployment insurance benefits.

Hawai‘i appellate courts have yet to consider the issue of

whether a back pay award in an employment

discrimination case must be reduced by the amount of

unemployment benefits received. The legislative history

of our employment discrimination law is also silent on

this issue. We are further confronted with a split among

jurisdictions that have addressed this matter.

Initially, we note that Hawai‘i’s employment

discrimination law was enacted to provide victims of

employment discrimination the same remedies, under

state law, as those provided by Title VII of the Federal

Civil Rights Act of 1964. Hse. Stand. Comm. Rep. No.

549, in 1981 House Journal, at 1166; Sen. Stand. Comm.

Rep. No. 1109, in 1981 Senate Journal, at 1363.

Accordingly, the federal courts’ interpretation of Title VII

is useful in construing Hawai‘i’s employment

discrimination law. See Furukawa, 85 Hawai‘i at 13, 936

P.2d at 649 (adopting the framework used by federal

courts in resolving question of discrimination under HRS

ch. 378).

[22] Under the collateral source rule, “a tortfeasor is not

entitled to have its liability reduced by benefits received

by the plaintiff from a source wholly independent of and

collateral to the tortfeasor[.]” Sato v. Tawata, 79 Hawai‘i

14, 18, 897 P.2d 941, 945 (1995) (citing 69 A.L.R. 4th §

2(a), at 139 (1989) (footnote omitted) (brackets added)).

Numerous federal circuits have applied the collateral

source rule in employment discrimination cases to refuse

to deduct benefits such as social security and

unemployment compensation from back pay awards. See,

e.g., Gaworski v. ITT Commercial Fin. Corp., 17 F.3d

1104, 1112 (8th Cir.1994) (citation omitted).

[23] Back pay awards in discrimination cases serve two

general functions: (1) to make victimized employees

whole for the injuries suffered as a result of the past

discrimination; and (2) to deter future discrimination. Id.

at 1113 (citing Albemarle Paper Co. v. Moody, 422 U.S.

405, 421, 95 S.Ct. 2362, 45 L.Ed.2d 280 (1975)). In

Albemarle, a Title VII case, the United States Supreme

**1117 *282 Court emphasized the importance of the

deterrence function, noting that

[i]t is the reasonably certain

prospect of a back pay award that

provide[s] the spur or catalyst

which causes employers and unions

to self-examine and to self-evaluate

their employment practices and to

endeavor to eliminate, so far as

possible, the last vestiges of an

unfortunate and ignominious page

in this country’s history.

422 U.S. at 417–18, 95 S.Ct. 2362 (citation and internal

quotation marks omitted) (some brackets added and some

in original). In this regard, the reduction of a back pay

award by unemployment benefits, which are not paid by

the employer, “makes it less costly for the employer to

wrongfully terminate a protected employee and thus

dilutes the prophylactic purposes of a back pay award.”

Sam Teague, Ltd. v. Hawai’i Civil Rights Com’n, 89 Hawai’i 269 (1999)

971 P.2d 1104, 74 Empl. Prac. Dec. P 45,721, 75 Empl. Prac. Dec. P 45,721

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 9

Gaworski, 17 F.3d at 1113 (citations omitted). In effect,

reduction of a back pay award results in a windfall to the

employer who committed the illegal discrimination by

virtue of a state program designed “to carry out a policy

of social betterment for the benefit of the entire state” and

not “to discharge any liability or obligation” of the

employer. Id. (quoting NLRB v. Gullett Gin, 340 U.S.

361, 364, 71 S.Ct. 337, 95 L.Ed. 337 (1951)). Although

collateral source payments represent additional benefits to

Shaw, “as between the employer, whose action caused the

discharge, and the employee, who may have experienced

other noncompensable losses, it is fitting that the burden

be placed on the employer.” Promisel v. First Am.

Artificial Flowers, 943 F.2d 251, 258 (2d Cir.1991)

(quoting Maxfield v. Sinclair Int’l, 766 F.2d 788, 795 (3d

Cir.1985)).

Based on these considerations, no federal circuit has

determined that unemployment benefits should be

deducted, as a matter of law, from back pay awards in

discrimination cases. Gaworski, 17 F.3d at 1113. The

federal circuits have split, however, over whether

deducting unemployment benefits should be left to the

discretion of the trial court. Id. A slight majority have

held as a matter of law that unemployment benefits

should not be deducted from back pay awards. See id.

(citing Craig, 721 F.2d at 85; Rasimas v. Michigan Dep’t

of Mental Health, 714 F.2d 614, 627–28 (6th Cir.1983),

cert. denied, 466 U.S. 950, 104 S.Ct. 2151, 80 L.Ed.2d

537 (1984); Brown v. A.J. Gerrard Mfg. Co., 715 F.2d

1549, 1550–51 (11th Cir.1983) (en banc); EEOC v. Ford

Motor Co., 688 F.2d 951, 952 (4th Cir.1982); Kauffman v.

Sidereal Corp., 695 F.2d 343, 346–47 (9th Cir.1982)).14

In Kauffman, the United States Court of Appeals for the

Ninth Circuit held in a Title VII case that unemployment

benefits received by a successful plaintiff were not offsets

against a back pay award. 695 F.2d at 347. The Ninth

Circuit noted that the only reported decision to set forth

reasons in support of deducting unemployment benefits

was EEOC v. Enterprise Ass’n Steamfitters Local 638,

542 F.2d 579, 591–92 (2d.Cir.1976), cert. denied, 430

U.S. 911, 97 S.Ct. 1186, 51 L.Ed.2d 588 (1977). The

Ninth Circuit summarized those reasons as follows:

1) [w]here the contributions to the

fund from which the benefits derive

are made solely by the defendant,

the collateral source rule does not

apply; 2) [t]he plaintiff would

otherwise receive a double

recovery; and 3)[t]he defendant

would otherwise in effect be

subjected to punitive damages.

Kauffman, 695 F.2d at 346 (brackets added). However,

the Supreme Court expressly rejected this reasoning in

upholding a decision refusing to deduct unemployment

benefits from an employee’s back pay award for

discriminatory discharge. Id. In Gullett Gin, supra, the

Supreme Court reasoned:

To decline to deduct state unemployment compensation

benefits in computing back pay is not to make the

employees more than whole, as contended by

respondent. Since no consideration has been given or

should be given to collateral losses in framing an order

to reimburse employees for their lost earnings,

manifestly no consideration need be given to collateral

benefits which employees may have received.

**1118 *283 But respondent argues that the benefits

paid from the Louisiana Unemployment Compensation

Fund were not collateral but direct benefits. With this

theory we are unable to agree. Payments of

unemployment compensation were not made to the

employees by respondent but by the state out of state

funds derived from taxation. True, these taxes were

paid by employers, and thus to some extent respondent

helped to create the fund. However, the payments to the

employees were not made to discharge any liability or

obligation of respondent, but to carry out a policy of

social betterment for the benefit of the entire state[.]

We think these facts plainly show the benefits to be

collateral.

340 U.S. at 364, 71 S.Ct. 337 (citations omitted) (brackets

added).

[24] Like the Ninth Circuit in Kauffman, we are persuaded

by the Supreme Court’s reasoning in Gullett Gin and,

therefore, hold, as a matter of law, that unemployment

benefits should not be deducted from awards of back pay

under our employment discrimination law.

Unemployment benefits are collateral source payments

that cannot be construed as “partial consideration” for

employment.

We further note that our

unemployment compensation

statute was enacted for the

beneficent and humane purpose of

relieving the stress of economic

insecurity due to unemployment. It

should therefore be liberally

construed to promote the intended

legislative policy. In view of the

basic policy of the statute of

protecting the worker from the

Sam Teague, Ltd. v. Hawai’i Civil Rights Com’n, 89 Hawai’i 269 (1999)

971 P.2d 1104, 74 Empl. Prac. Dec. P 45,721, 75 Empl. Prac. Dec. P 45,721

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 10

hazard of unemployment, our

courts must view with caution any

construction which would narrow

the coverage of the statute and

deprive qualified persons of the

benefits thereunder.

Camara v. Agsalud, 67 Haw. 212, 216–17, 685 P.2d 794,

797 (1984) (internal citations omitted). Given the purpose

of our unemployment compensation law, we believe that

no employer should benefit from the state’s efforts to

provide for an illegally discharged employee. The State

has the legal authority, under certain conditions, to recoup

unemployment compensation benefits as directed by HRS

§ 383–44(a) (1993).15 Although we do not mean to

suggest that these conditions exist in this case, our point is

that recoupment of state paid benefits should be a remedy

that inures to the benefit of the State rather than the

discriminating employer. Accordingly, we hold that the

circuit court did not have discretion, as a matter of law, to

reduce the award of back pay by the amount of

unemployment benefits received by Shaw.16

IV. CONCLUSION

For the reasons set forth above, we affirm the circuit

court’s order affirming the final decision of the

Commission.

All Citations

89 Hawai’i 269, 971 P.2d 1104, 74 Empl. Prac. Dec. P

45,721, 75 Empl. Prac. Dec. P 45,721

Footnotes 1

An official of Select Temporary Services, Inc. (Select), a company which provides temporary workers to businesses, testified before the hearings officer with regard to providing a temporary worker to replace Shaw. Select has never had any employees with experience in selling, programming, or otherwise working with pagers. However, Select has employees with experiences similar to Shaw’s work experience and has employees with office management, sales, and customer relations experiences. According to a representative of Select, these employees, if supervised, were capable of learning how to sell, program, and maintain pagers and could handle cash amounts up to $10,000.

2

As this court has accorded persuasive weight to the construction of statutes by administrative agencies charged with overseeing and implementing a particular statutory scheme, we give persuasive weight, in this instance, to the Commissioner’s administrative rules that further the purposes of HRS § 386–11. See, e.g., Aio v. Hamada, 66 Haw. 401, 406–07, 664 P.2d 727, 731 (1983).

3

Employer does not allege that the rule-making procedures set forth in HRS §§ 91–3 and 91–4 (1993) were not followed. Nor does Employer argue that HAR § 12–46–6.1 enlarges, alters, or restricts the provisions of the statute. See Puana v. Sunn, 69 Haw. 187, 737 P.2d 867 (1987) (holding administrative rule valid where it was a reasonable regulation that carried out purpose of legislation).

4

We further note that the issue regarding the timeliness of the initial complaint has not been raised by Employer.

5

HRS § 378–1 provides that “ ‘Employer’ means any person including the State or any of its political subdivisions and any agent of such person, having one or more employees[.]” (Brackets added.)

6

Similarly, HAR § 12–46–106 provides in relevant part: Females shall not be penalized in their terms or conditions of employment because they require time away from work on account of disability resulting from pregnancy, childbirth, or related medical conditions.

7

Although Employer does not challenge the validity of these administrative rules, we note that these rules are not preempted by Title VII of the Civil Rights Act of 1964, as amended by the Pregnancy Discrimination Act. See California Fed. Sav. & Loan Ass’n v. Guerra, 479 U.S. 272, 107 S.Ct. 683, 93 L.Ed.2d 613 (1987). We further note that these rules are not protectionist legislation favoring one sex above the other. See, e.g., Miller–Wohl Co. v. Commissioner of Labor & Indus., 214 Mont. 238, 692 P.2d 1243, 1253 (Mont.1984).

8

The Montana Maternity Leave Act (MMLA) of 1975 provided in relevant part: It shall be unlawful for an employer or his agent to: (1) terminate a women’s employment because of her

Sam Teague, Ltd. v. Hawai’i Civil Rights Com’n, 89 Hawai’i 269 (1999)

971 P.2d 1104, 74 Empl. Prac. Dec. P 45,721, 75 Empl. Prac. Dec. P 45,721

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 11

pregnancy; [or] (2) refuse to grant to the employee a reasonable leave of absence for such pregnancy[.] Mont.Code Ann. § 49–2–310, 311 (1983) (brackets added). In applying the MMLA, the Montana Supreme Court noted:

The MMLA is a legislative recognition of changing economic mores in American family life. We are told that in 40% of American households there is a working wife or mother. A growing number of single women support themselves, or themselves and children. In family households the need for two paychecks spreads across the economic spectrum. Even young upwardly-mobile professionals ..., like a bi-plane, need two wings working to stay aloft. Economic necessity has converged with the growing insistence of women for equal opportunity in all fields to bring about legislative enactments such as the MMLA. The biblical imprecation that the male shall eat his bread by the sweat of his brow has been broadened; Eve is now included.

9

It has been noted that the normal period of pregnancy leave is about six weeks. See H.R.Rep. No. 95–948, 95th Cong., 2d Sess. 5 (1978).

10

In Furukawa v. Honolulu Zoological Society, 85 Hawai‘i 7, 936 P.2d 643 (1997), we summarized the framework for the development of evidence in an employment discrimination case using the framework set forth by the United States Supreme Court in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973). We noted that, although “a federal court’s interpretation of Title VII is not binding on this court’s interpretation of civil rights laws adopted by the Hawai‘i legislature ... [,] the McDonnell Douglas framework can be a useful analytical tool in resolving the elusive factual question of intentional discrimination.” Furukawa, 85 Hawai‘i at 13, 936 P.2d at 649 (citation and internal quotation marks omitted).

Under the McDonnell Douglas framework, a plaintiff has the burden to establish a prima facie case. Furukawa, 85 Hawai‘i at 12, 936 P.2d at 648. To establish a prima facie case involving discriminatory discharge, the plaintiff must satisfy the following three-part test:

(1) [t]he plaintiff must be a member of a protected class; (2) the plaintiff must be demonstrably capable of performing his [or her] employment duties; and (3) the employer, after discharge, sought people with the same qualifications to fill the position.

Id. at 13 n. 3, 936 P.2d at 649 n. 3 (noting agreement by the federal circuits) (citations omitted) (brackets added). Once the plaintiff establishes a prima facie case, the defendant must “proffer a legitimate nondiscriminatory explanation of the adverse employment action.” Id. at 12, 936 P.2d at 648. Thereafter, the plaintiff must demonstrate that the defendant’s proffered reasons were “pretextual.” Id. At all times, the burden of persuasion remains on the plaintiff. Id. at 12–13, 936 P.2d at 648–49. In this case, the Commission’s following findings were not clearly erroneous: (1) Shaw was part of a protected class; (2) Shaw was capable of performing the duties of the position; and (3) Employer, after discharging Shaw, sought people with lesser qualifications to fill the position.

11

HRS § 378–2(1)(c) (1993) provides in relevant part: It shall be an unlawful discriminatory practice because of ... sex ... [f]or any employer ... to make any inquiry in connection with prospective employment, which expresses, directly or indirectly, any limitation, specification, or discrimination[.]

12

See Automobile Workers v. Johnson Controls, Inc., 499 U.S. 187, 200–01, 111 S.Ct. 1196, 113 L.Ed.2d 158 (1991) (interpreting BFOQ defense to Title VII). In Johnson Controls, the United States Supreme Court noted:

Under § 703(e)(1) of Title VII, an employer may discriminate on the basis of “religion, sex, or national origin in those certain instances where religion, sex, or national origin is a bona fide occupational qualification [BFOQ] reasonably necessary to the normal operation of that particular business or enterprise.” 42 U.S.C. § 2000e–2(e)(1). .... The wording of the BFOQ defense contains several terms of restriction that indicate that the exception reaches only special situations. The statute thus limits the situations in which discrimination is permissible to “certain instances” where sex discrimination is “reasonably necessary” to the “normal operation” of the “particular” business. Each one of these terms—certain, normal, particular—prevents the use of general subjective standards and favors an objective, verifiable requirement. But the most telling term is “occupational”; this indicates that these objective verifiable requirements must concern job-related skills and aptitudes. Justice White defines “occupational” as meaning related to a job. [....] According to him, any discriminatory requirement imposed by an employer is “job-related” simply because the employer has chosen to make the requirement a condition of employment. [....] This reading of “occupational” renders the word mere surplusage. “Qualification” by itself would encompass an employer’s idiosyncratic requirements. By modifying “qualification” with “occupational,” Congress narrowed the term to qualifications that affect an employee’s ability to do the job.

(Emphasis added.)

Sam Teague, Ltd. v. Hawai’i Civil Rights Com’n, 89 Hawai’i 269 (1999)

971 P.2d 1104, 74 Empl. Prac. Dec. P 45,721, 75 Empl. Prac. Dec. P 45,721

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 12

13

Although Shaw earned $1,300 per month as office manager for Employer, the Commission reduced the total award by $400, the amount she earned as a part-time teacher during the applicable time period.

14

But see Daniel v. Loveridge, 32 F.3d 1472, 1478 n. 4 (10th Cir.1994); Hunter v. Allis–Chalmers Corp., 797 F.2d 1417, 1429 (7th Cir.1986) (Posner, J., acknowledging discretion as Seventh Circuit rule but stating that it “may be unduly favorable to defendants”); Lussier v. Runyon, 50 F.3d 1103, 1109 (1st Cir.1995); Dailey v. Societe Generale, 108 F.3d 451, 459–61 (2d Cir.1997).

15

HRS § 383–44(a) (1993) provides in relevant part: Any person who has received any amount as benefits under this chapter to which the person was not entitled shall be liable for the amount unless the overpayment was received without fault on the part of the recipient and its recovery would be against equity and good conscience.

16

Employer also argues that Shaw failed to mitigate by not seeking “substantially equivalent employment” with pager companies. The final decision of the Commission found that on January 11, 1992, Shaw applied to RAM Paging Hawaii as well as to other telecommunications companies. Based on our review of the record, the Commission’s finding is not clearly erroneous.

End of Document

© 2018 Thomson Reuters. No claim to original U.S. Government Works.